Marketing & Sales

A Broker Thrives by Removing Impediments to New-Home Buying

Marketplace Homes’ guaranteed lease program is expected to help sell 1,700 new homes this year.

Even as housing markets improve, there are still plenty of homeowners who resist buying a new house because they can’t sell their old one.

During the first quarter of this year, Marketplace Homes—which offers owners a guaranteed monthly lease payment for up to six years, or until it sells their home, if the owners agree to purchase a new-construction house from one of Marketplace’s builder-partners—was contacted by more than 6,000 potential customers in such situations.

Marketplace Homes works with 87 builders (including 12 of the top 25) in 40 markets and 20 states. Last year, it helped those builders sell just under 1,100 homes (compared to 543 in 2011), and was ranked 189th on Inc. magazine’s annual list of fastest-growing companies. (Its revenue jumped to about $20 million in 2012, from $8.1 million the previous year.)

In the first quarter of 2013, Marketplace helped sell 20 homes for K. Hovnanian in Chicago and 35 homes in Atlanta for D.R. Horton. Marketplace is on track this year to help builders sell 1,700 new houses.

“The window of opportunity is always closing unless you adapt,” says Mike Kalis, the managing principal at Livonia, Mich.–based Marketplace Homes, which opened for business in 2003. Last year his company started listing for-sale homes for the first time. Marketplace Homes also takes an option-to-purchase on every client’s house, and expects to have at least $750 million in real estate under option within the next three years.

Kalis says that his company currently has more than 500 owners on backlog waiting to purchase a new house, and the “vast majority” of these clients go for the guaranteed lease program. Marketplace makes a pact with these owners that it will waive its commission if the owners don’t get the agreed-upon selling price.

However, it appears that a growing number of owners also don’t mind Marketplace renting out their homes, sometimes for an extended period; Kalis notes that his company has been managing some clients’ properties for three years, and its occupancy rate always hovers around 98%. “We sometimes joke about offering a 50-year lease guarantee,” he says. “People are getting the idea that holding real estate isn’t such a bad idea.”

Kalis doesn’t think the demand for rental properties is going to stay hot forever, though. “Everything has a rhythm, and as home values went down, rents went up. But the cost of renting has increased tremendously. In Detroit, it’s 70% more expensive to rent than to buy. And when one of our builders, Allen Edwin Homes, is selling a $140,000 at 3.5% interest, and we’re renting the client’s older house for $800, $900 a month, there’s a disparity.”

But Kalis also is confident that Marketplace’s services will be in demand even in a stronger housing market. “There will always be clients who need help selling their old houses,” he predicts. “And if the market is 1 million starts, if I can get just 2% of that we’d have a very good business.”

BUILDER Online provides home builders with home building news, home plans, home design ideas, and building product information, helping them manage their home building operations efficiently and profitably.